A taxing scenario

Cinar claims witch hunt as probe heats up

MONTREAL — On the same day that the Royal Canadian Mounted Police took over the probe into fraud by Canuck entertainment companies, top execs TV production company Cinar Corp. branded the investigation a politically motivated witch hunt.

The opposition Bloc Quebecois has alleged in the House of Commons that the company under investigation for tax fraud is Montreal children’s TV producer Cinar, but neither the Montreal police nor the RCMP have named the target of their investigations.

The firm is accused of putting the names of Canadian writers on U.S. screenplays in order to fulfill Canadian-content quotas to obtain tax-credits from the federal government. These tax credits usually account for 20%-25% of the financing for Canuck productions.

On Thursday, Cinar co-CEOs Micheline Charest and Ronald Weinberg responded publicly to the allegations for the first time, telling Daily Variety that they feel Bloc Quebecois is attempting to embarrass the ruling Liberal government with the accusations. It has been alleged that Charest has close ties to the Liberal Party of Prime Minister Jean Chretien, which Charest denied Thursday.

The Bloc Quebecois MPs have been making the allegations about Cinar in the House of Commons, where they are immune from the country’s libel laws, and have refused to repeat the allegations outside the Commons.

“It’s nothing short of Kafka-esque,” said Charest. “I think it’s incredibly irresponsible (on the part of the Bloc Quebecois). Does the Bloc Quebecois have any interest in seeing a company in Quebec with 250 people working here, that has attracted all kinds of positive attention, do they want to see this destroyed?”

RCMP corporal Gilles Deziel said it was too early to tell how long the tax fraud investigation would last and whether or not it would expand to include other film companies.

Industryites in the Great White North are nervously waiting to see the long-term impact of the allegations on the entire film and TV biz in Canada, fearing that it could have a negative impact on the tax-credit program. Boosted by the those breaks, the burgeoning Canuck TV and pic production has been able to lure a significant number of U.S. firms north.

“I’m really disturbed and saddened,” said Arnie Gelbart, prexy of Montreal-based Galafilm, which produced the Genie Award-winning films “Lilies” and “The Hanging Garden.” “I don’t think it’s prevalent. I’d be very surprised. But we need the goodwill of the people of Canada and their representatives, the politicians. We need to be purer than Caesar’s wife.”

Cinar’s shares have taken a beating on both sides of the border since the allegations of tax fraud first surfaced several days ago. But company execs insist their core business remains sound and that they will weather the storm.

Cinar exec VP Hasanain Panju said the company could even continue to finance its shows without the federal and provincial tax credits.

“Fifty percent of our business is the education business (which does not access tax credits),” said Panju. “In the worst-case scenario, if these government incentives didn’t exist, the company would basically continue as is but we’d replace those incentives with cash from partners.”